Question

Chapter 3 - Graded Discussion This discussion is derived from the "Analysis for Decision Making" ADM Section at the end of Chapter 3 and is being modified for our online discussion. ADM-3 asks us to look at recent data taken from Nike, Incorporated: A) Determine the amount of change and percent of net income change from Year 1 to Year 2. B) Determine the percentage relationship between net income and sales for Year 1 and Year 2. When solving for A, finding the percent of change is a "horizontal analysis" problem, which takes the change in amount and divides it by the base year: $2,643 - $2,472 = 221 (the amount of change): $221/$2,472 = 8.9% of change increase) from Year 1 to Year 2 When solving for B, finding the percent relationship between net income and sales for Year 2 and Year 1 "vertical analysis" problems is discovered by, dividing net income by sales: Year 1: $2,472/$25,313 = 9.76% (0976) Year 2: $2,693/$27,799 = 9.68% (.0968) Discussion: 1. What conclusion can you draw from this analyses above from A & B? 2. Do you think that Nike's 2018"Just Do It" ad campaign, featuring Collin Kaepernick was to boost sales or to take a political stance on a sensitive issue or both? Try to keep your comment on the accounting side versus any personal view you may possess, as I do not want anyone to be offended (please/thanks). Always keep it positive! 3. Finally, right or wrong aside, there was a financial impact to that ad campaign. Did it strengthen sales or decline sales? I only want you to discuss any financial impact that you can find. Were the results good or bad?

Answer 1

1. From the given data, though the horizontal analysis show an increase in net income (8.9%), the net income as a percentage of total sales in decreased from 9.76% to 9.68%. This is because increase in expenditure to boost sales. The expenditure incurred to boost sales has impacted the sales growth but not at fullest which is clearly shown in decrease of net margin percentage of total sales. To explain it further, the net income is arrived after deduction business expenditure from sales. The advertisement expenditure could impact majorly on net income because the business's brand is highly dependent on advertisements/endorsements. Therefore we can attribute the decrease in net income margin to the increased expenditure that did not the increased sales.

2. NO comment.

3. Sales strengthened but the increased sales did not match the previous year's net income margin.